Will Weight Watchers’ Stock Bounce By 50% Post Coronavirus?

by Trefis Team
-8.11%
Downside
29.92
Market
27.49
Trefis
WW
Weight Watchers International
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Comparing the trend in Weight Watchers’ (NASDAQ: WW) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 50% once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Weight Watchers’ performance vs. the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Weight Watchers Stock Fare Compared With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. Between January 31st and March 30th, Weight Watchers stock has lost 49% of its value (vs. about 21% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

Weight Watchers’ Stock Has Fallen Considerably Because The Situation On The Ground Has Changed

The decline in Weight Watchers’ stock is understandable, considering the impact that the outbreak and a broader economic slowdown are likely to have on consumer spending in the wellness and fitness industry. Moreover, people are staying in and avoiding public places which is adversely impacting the company’s studio (non-digital subscriber) business. We believe Weight Watchers’ Q1 and Q2 results will confirm this reality with a drop in both studio+digital, as well as product sales revenues. Notably, the company derives a bulk of its revenues from the US which has become the new epicenter of the outbreak, with the country recording the largest numbers of covid-19 cases across the globe.

But Weight Watchers Stock Witnessed Something Similar During The 2008 Downturn

  • We see Weight Watchers’ stock declined from levels of around $51 in October 2007 (the pre-crisis peak) to levels of about $17 in March 2009 (as the markets bottomed out) – implying the company’s stock lost as much as 68% from its approximate pre-crisis peak. This marked a steeper drop than the broader S&P, which fell by about 51%.
  • However, Weight Watchers stock recovered strongly post the 2008 crisis to about $27 in early 2010 – rising by 66% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will Weight Watchers’ Stock Recover Similarly From The Current Crisis?

  • Keeping in mind the fact that WW stock has fallen by 49% this time around compared to the 68% decline during the 2008 recession, a potential recovery of 50% to levels of near $25 is potentially possible once economic conditions begin to show signs of improving. This marks a partial recovery back to the $33-level Weight Watchers stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. Additionally, the complete set of coronavirus impact and timing analyses is available here.

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